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Surging Unemployment? Home Sales Down The..... #brokermac
April 08, 2020 at 1:51pm | Mac Rogers
Guys it's Mac with Albert Rogers here in Castro Valley, CA. I wanted to share with you the latest unemployment numbers and the latest projections and also a couple of quotes from two financial experts. That I found interesting and also can give us an
insight of what to expect in the coming months for real estate and the economy as w whole.
The last unemployment numbers saw ten million Americans lost their jobs over a 2 week period. On May 8th, we will see the latest round of numbers and it is expected to be in the double digits. The coronovirus has the economy to a screeching halt. Everyone
is feeling the financial toll.
The government passed the CARES Act to find ways to assist and help as many people, small businesses and companies to keep our economy going.
Here's a quote from James Bullard, President of the Federal Reserve Bank of St. Louis.
“This is a planned, organized partial shutdown of the U.S. economy in the second quarter. The overall goal is to keep everyone, households and businesses, whole.”
Even though this shutdown is planned, the uncertainty of when we can go back to normal is striking fear in a lot of people.
Add to this the concern of how badly will the U.S. economy be damaged if people are forced to sell their homes or can't buy homes. This undoubtedly could put a another strain in the economy which could lead to even more job losses. Housing is not only
a necessity but also a major part of the overall economy in this country.
Chris Herbert, Managing Director of the Joint Center for Housing Studies at Harvard University, also chimed and addressed the toll this crisis will have on our nation, explaining:
“Housing is a foundational element of every person’s well-being. And with nearly a fifth of US gross domestic product rooted in housing-related expenditures, it is also critical to the well-being of our broader economy.”
Its logical to think that there is a direct correlation between unemployment and housing. Unemployment goes down, home sales go up and vice versa. Recent data however shows that this is not the case in the last thirty years. Check out this graph.
The unemployment rate was rising between 1992-1993, yet home sales increased.
Same thing in 2001-2003. The unemployment rate was rising between 2001-2003, and home sales increased.
In the last housing crash it the unemployment rate was rising between 2007-2010, and home sales significantly decreased.
This recent boom we have the unemployment rate was falling continuously between 2015-2019, and home sales remained relatively flat.
So from this data there doesn't seem to be a direct correlation. But what about this time around? Could it go hand in hand? We have not seen job losses the way it is happening right now. How fast we went from one of the lowest unemployment numbers to
where projections are headed has not been seen in almost one hundred years.
Goldman Sachs is projecting unemployment to be 15% in the third quarter of this year but flattening to single digits by the fourth quarter, and then just over 6% percent by the fourth quarter of 2021. Higher were we were when this whole thing happened
but definitely manageable.
Some are starting to compare what we will go through as something similar to the great depression and more recently the great recession. Here are the numbers comparing those two financial crisis compared to what we are currently going through as well
as the Goldman Sachs projections.
So what's the bottom line? Given what we know historically and what the expert projections will be it is certain that we will face a housing market challenge this year. Another thing that could also derail housing is access to credit.
However with the passage of the CARES Act and hopefully other types of help down the road available to those who have lost their jobs and the fact that once we solve this virus problem, the housing industry should be fine in the long term.
If you have any comments or questions, you can click the link to send us a message or comment directly below. Stay safe and sane and this too shall pass.